The SEC announced four whistleblowing cases in May and June 2016. The recent announcements show, once again, how whistleblowing continues to be rewarded in the US. These developments emphasise the importance of having good whistleblowing systems and compliance protocols in place which, in turn, enable employees to report and discuss issues internally first before taking the matter to external supervisors. It also allows companies to respond appropriately to such incidents and pay attention to whistleblowers. In the first case, the SEC announced an award of USD 17 million, the second-largest award ever. According to the SEC, there were five “claimants“, but only one received an award. In the second case, the SEC initially denied an award, but changed its mind and awarded USD 3.5 million when the whistleblower produced additional evidence that helped the SEC’s investigation. In the third case, the SEC announced that the whistleblower would be awarded USD 5-6 million. This award is the fourth highest award ever. Allegedly, the whistleblower’s tips helped the SEC uncover violations that would otherwise have been virtually impossible to detect. In the last case, the SEC announced a shared whistleblowing award of USD 450,000 to two individuals whose tip allegedly led to a corporate accounting investigation. These whistleblowers also provided valuable help during the investigation.
The SEC announced on 9 June 2016 the second-largest award ever of USD 17 million. The highest ever award of USD 30 million was announced in September 2014. According to the SEC order, five “claimants” applied for an award, but only one claim was approved by the Enforcement’s Claims Review Staff (CRS). When making an award recommendation, the Office of the Whistleblower submits a recommendation package to the CRS. Allegedly, the whistleblower gave critical information that advanced the investigation. The whistleblower also supported the staff in seeking evidence supporting the Commission’s charges which precipitated the investigation by the SEC.
In the second case, the SEC announced on 13 May 2016 that it had issued a whistleblower award of more than USD 3.5 million to a whistleblower whose tip allegedly reinforced an ongoing investigation by additional evidence of wrongdoing and thus strengthened the SEC’s case. According to the SEC order, the whistleblower was not entitled to an award at first because the information related to an SEC investigation that had already started, but had not led to a successful enforcement action. The whistleblower subsequently submitted a timely written response to appeal the CRS’ preliminary determination. A timely written response means that a whistleblower has 30 days to request a copy of the record that the CRS based its decision on or to request a meeting with Office of the Whistleblower staff, or request both. If a whistleblower fails to submit a timely written response, the preliminary decision becomes the SEC’s final order. After receiving the whistleblower’s written response, the CRS also received additional evidence of wrongdoing that strengthened the SEC investigation.
In the announcement, the SEC noted that “whistleblowers should be encouraged to come forward and report allegations of potential violations even if they think the SEC may already be looking into it.”
In the third case, the SEC announced on 17 May 2016 that it had issued an award of USD 5 to 6 million to a whistleblower whose tip allegedly led to an enforcement action that would otherwise not have been successful, as the securities violations would not have been discovered. This award will be the fourth-highest award ever.
The fourth and last whistleblower award that the SEC announced on 20 May 2016 was for USD 450,000, to be shared between two individuals. According to the SEC, their tip made it possible for the SEC to open a corporate accounting investigation. Moreover, the two individuals offered valuable assistance during the investigation.
The SEC’s whistleblower programme has now awarded more than USD 85 million to 32 whistleblowers since the programme started in 2011. Whistleblowers are an increasingly important aspect of bribery investigations. Not only do these developments reflect the significant influence of the programme on law enforcement and public awareness, they also emphasise the importance of having an effective whistleblowing policy or compliance plan within the company, which will give companies guidance and the ability to respond appropriately to incidents. According to an OECD report of March 2016, 84% of whistleblowers who reported externally did so only after raising their concerns internally. If you require more information on this subject, our compliance lawyers can further advise on this.
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